7 Money Lessons from The Richest Man in Babylon

7 Money Lessons Nathan Shooter

Think it's too late to take control of your money? Think again. Here's 7 simple lessons you can apply to your life today.

Now and then, along comes a book that changes the way you think. For me, The Richest Man in Babylon, was one such book. So you that are inspired into action, this podcast/video/blog edition will share the biggest lessons that I learnt from this classic finance book.

You'll be surprised at how approachable the author's ideas are; financial common sense divided into 7 simple parts. From my experience, I found that the key to applying the principles was to keep it simple, so that I could be consistent. Significant financial change begins with simple steps. Let's dive in!


1. Pay yourself first - “Start thy purse to fattening”

  • Learn to see the value of your work, and place a priority on paying yourself first.
  • Create a simple system to allocate where your money gets spent. Here's a quick look at how I aim to divide it:
    • 10% = Pay yourself first.
    • 10% = Pay debts (start with most small, expensive, high interest debts first).
    • 10% = Future savings.
    • 10% = Generosity (charity, church tithe, non-profit organisations etc.)
    • 60% = Living expenses, including mortgage. 

2. Live within your means - “Control thy expenditures”

  • Don't spend more than you make.
  • Either spend less, or earn more.
  • Be clear on the difference between a desire and an expense (especially for those of us in business).
  • Resist the habit of spending more as we earn more. Just because our income might increase, doesn't mean our spending should.

3. Make money work for you - “Make thy gold multiply”

  • Understand compound interest, and how you can benefit from it.
  • Bank interest: Consider opening an online high interest account, that you can't access with a ATM card.
  • Investments: Only invest after you have saved a reserve of 6-8 months worth of living expenses.
  • There are many investment vehicles, choose the one you understand the most (I experimented with Forex, but pursued other things instead).

4. Safeguard your wealth - “Guard thy treasures from loss”

  • Have a variety of insurance policies, income protections etc..
  • Create financial reserves (emergency funds).
  • Avoid investments that sound 'too good to be true' (they probably are).
  • Remember "it costs nothing to ask a good friend for counsel".
  • Seek advice from people who are experts in their particular field, people who have actually experienced what you’re attempting.

5. Own your own home - “Make of they dwelling a profitable investment”

  • Where possible, own your home.
  • Be smart about your biggest expense/investment, if it isn’t home ownership.
  • Buy a home that is below the maximum you can afford, yet one that you can still enjoy.

6. Have a retirement plan - “Insure a future income”

  • It is a reality that all of us will become old, and eventually stop work (eek!!).
  • Plan for the day that you do stop working.
  • Look at ways to maximise the earning potential of your superannuation (Aus), 401k (USA) or similar.
  • Make sure your income will continue work without you having to physically work.
  • Consider those who are financially dependent on you.
  • Create safety through investment diversity.

7. Invest in your personal development - “Increase thy ability to earn”

  • Strive to become wiser and more knowledgeable.
  • We live in a very exciting time: the Information and Innovation Age.
  • Knowledge is literally at your fingertips, thanks to the Internet.
  • This is my approach to running my business: LEARN > EARN > GET > GIVE.

Bonus tips:

  • Our ability to handle money successfully, will influence whether our dreams and desires are realised.
  • “It costs nothing to ask wise advice from a good friend.”
  • Saving money is important, but so is fulfilment. Learnt to enjoy life, without feeling the overbearing pressure to save.
  • Paying your debts is a sign that you have respect for yourself (aaw snap!).
  • My favourite tip: “The soul of a free man looks at the world as a series of problems to be solved. Meanwhile, the soul of a slave whines, “What can I do?””

Your turn:

  • What 2 simple steps can you take, to create sustainable, significant financial change?
  • Have you thought to yourself, "it's too late to improve my financial position"? If so, what are 2 attitudes about money, you could change this week?

Disclaimer: This blog/podcast/video book review does not contain financial advice.